STMicroelectronics Q3 Profit Down 68%, MCU Share Drops in China

STMicroelectronics, a leading European semiconductor company, has unveiled a plan aimed at reducing its operational costs by nearly $1 billion by 2027. This "scale adjustment" initiative was mentioned in the company's third-quarter 2024 financial results, though details were scarce. The company also projected a decline in revenue for the next two quarters, forecasting that the drop between Q4 2024 and Q1 2025 will be "well above normal seasonal levels."

In a statement about the company's financial performance, STMicroelectronics CEO Jean-Marc Chery explained that the company would accelerate its transition to manufacturing 300mm silicon wafers at its facilities in Agrate, Italy, and Crolles, France. Additionally, the company plans to shift silicon carbide (SiC) production to 200mm wafers in Catania, Italy. Chery noted that moving to 300mm wafers instead of 200mm wafers would yield at least a 20% improvement in productivity.

However, it remains unclear whether this shift will lead to the closure of any 200mm wafer production lines or facilities.

In Q3 2024, STMicroelectronics reported net income of $351 million, a significant 67.8% drop year-on-year. Total revenue reached $3.25 billion, which remained flat compared to the previous quarter but saw a 26.6% decline year-on-year. Chery stated, "The Q3 net income is in line with the midpoint of our business outlook range. Revenue from personal electronics exceeded expectations, while industrial and automotive revenues showed a decline."

He also mentioned, "In the first nine months, net income for all reportable segments declined by 23.5%, particularly in microcontrollers (MCUs), which were impacted by continued weakness in the industrial market."

Notably, every business segment of STMicroelectronics reported year-on-year sales declines, although some saw modest quarter-on-quarter growth. The company's MCU division posted Q3 2024 revenue of $829 million, up 3.6% compared to the previous quarter but down 43.4% year-on-year from $1.47 billion. As a result, the Analog, MEMS, and Sensors (AM&S) division became the largest segment for the company.

One contributing factor to the MCU sales drop was the decline in market share in China. Looking ahead to Q4 2024, STMicroelectronics forecasts total revenue of $3.32 billion, marking a 2.2% increase compared to Q3 but a 22.4% decrease year-on-year. This would bring the company's full-year 2024 revenue to $13.27 billion, a 23.2% decline from the previous year, further lowering its prior expectations. The weak forecast is primarily due to anticipated declines in automotive and industrial revenues, though gains in personal electronics will partially offset this.

Chery confirmed that the company's capital expenditures for 2024 will remain at $2.5 billion, but noted that this figure will decrease over the next three years.